Tax Exempt Financing

Eligible Entities: Manufacturers, 501(c)3 organizations and exempt facilities (i.e. solid waste disposal facilities, sewage treatment facilities, local furnishings of electricity, gas and water, hazardous waste disposal facilities, etc.).

Use of Proceeds: Land and building acquisition or renovation, machinery and equipment acquisition (new - unless part of a real estate acquisition), refinancing (of tax-exempt debt only), closing costs (no more than 2% of issuance).

Maximum Loan Amount: Manufacturing Projects: the borrower or its affiliates may not incur more than $10,000,000 in capital expenditures in the city or municipality of the project during a six-year period beginning three years prior to the date of the financing closing. Also the borrower and its affiliates may not have in excess of $40,000,000 aggregate in tax exempt debt in the United States. Exempt Facility Projects: Funds are limited to the amount of available allocation the state has set aside for these types of projects and any project requiring $50,000,000 or more must be financed through the Pennsylvania Economic Development Financing Authority. Non-Profit 510 (c) 3 Projects: The non-profit entity and all related entities cannot have more than $150,000,000 of outstanding non-hospital tax-exempt debt.

Minimum Loan Amount: Generally, $100,000 for tax-exempt mortgages/notes and $2,000,000 for bond issues (to be cost effective).
Term: Negotiated between borrower and lender, but cannot exceed 120% of the depreciable life of the asset being financed.

Interest Rate: Tax-exempt mortgages/notes are usually priced between 70% and 80% of the going prime rate (currently 8.5%). Tax-exempt bond issue rates fluctuate with the lower floater market, but tend to be significantly lower than mortgages.

Job Creation/Retention: Create or retain within three years of the financing at least one (1) job for every $50,000 borrowed.

Commencement: Projects must receive approval(s) from the Secretary of the PA Department of Community and Economic Development (DCED) prior to closing on the taxable financing. However, projects may commence activity upon the approval of the local Industrial Development Authority unless other wise instructed by bond counsel.

Relocation: Relocation of a company from one labor market area of the Commonwealth to another is prohibited, unless a waiver is obtained from the Secretary of PA DCED.

Taxes: The borrower and affiliates along with their principal owners must be current in payment of all applicable state and local taxes and other obligations.

Religious Affiliations: Industrial Development Authorities (IDAs) are prohibited from financing religious facilities. If the borrower has a religious affiliation, they must verify in writing that the proceeds of the financing will not be used to fund religious activities/facilities.

If you have any questions concerning this program, please do not hesitate to contact:

Department of Community and Economic Development
Northampton County Courthouse
669 Washington Street
Easton, PA 18042
Phone: 610/559-3200
Fax: 610/559-3775